Government Operations Committee on May 21st, 2013

[Pablo Sobrino, Associate Assistant Deputy Minister, Acquisitions Branch, Department of Public Works and Government Services]

Yes, Mr. Chair. I'll do that.

Good morning. I am pleased to appear before you today to discuss the integrated relocation program. I am Pablo Sobrino, the associate assistant deputy minister for the acquisitions branch at the Department of Public Works and Government Services Canada.

Here with me today are Mr. Normand Masse, the director general who oversees the services and technology acquisition management sector, and Monsieur Vincent Robitaille, senior director of the professional services procurement directorate.

The Integrated Relocation Program provides federal government employees, members of the Royal Canadian Mounted Police and members of the Canadian Forces with services to assist with their relocation to new work locations owing to operational requirements. Those relocation services, including, but not limited to, relocation planning, marketing assistance and destination services—such as planning for purchase or rental of a replacement residence, payment of legal fees, and home inspection—are critical to support about 19,500 individuals who move each year.

As a common service provider for acquisition services, the Acquisitions Branch has the mandate, with respect to the Integrated Relocation Program, to carry out a fair and open procurement process to award contracts for the overall administration and delivery of those services.

As the committee members know, a November 2006 Auditor General's report concluded that the procurement process that led to the award of the 2004 contracts was not tendered in a fair and equitable manner, owing to the inclusion of an inaccurate estimate for third-party property management services.

Further to the release of the Auditor General's report in March 2007, an unsuccessful bidder, Envoy Relocation Services, filed a statement of claim in the Ontario superior court seeking $62 million in damages for lost profits, bid preparation costs, and alleged damage to its reputation relating to both the 2002 and 2004 procurement processes, plus punitive damages.

The trial commenced in September 2011 and concluded in December 2012. On April 6, 2013, the Ontario superior court released its judgment in favour of Envoy. The government has not yet completed its review of the decision of the Ontario superior court. In order to protect its right to appeal within the timelines prescribed by the court, the government filed a notice of appeal with the Ontario Court of Appeal. Since the matter is before the court, it is not appropriate for us to comment further on this particular case at this time.

Also further to the release of the Auditor General's report, in May 2007, a report was released by the Standing Committee on Public Accounts. It recommended that Canada not exercise the options to extend the duration of the 2004 contracts, and that the requirement be re-tendered. PWGSC has accepted and fully implemented the recommendations received from both the Standing Committee on Public Accounts and the Auditor General.

As such, following industry consultations and a competitive request for proposals, a contract was awarded to Brookfield Global Relocation Services—formerly Royal LePage Relocation Services—in August 2009. Valued at $151.2 million, this contract is valid until November 2014, with two one-year options available that could be exercised to extend it until November 2016.

We are currently working towards the launch of the next competitive procurement process for the integrated relocation program and would be pleased to discuss our progress. However, please note that while we are able to discuss high-level lessons learned that are informing how we will undertake the next process, in order to preserve the fairness of the upcoming process we are unable to address specific details related to the procurement strategy.

In addition, we can't really speak to specific technical requirements, as those are the responsibility of our client departments, the Treasury Board Secretariat, the Department of National Defence, and the Royal Canadian Mounted Police.

For these reasons, I hope that the members of the committee will understand that there may be limitations to what I am able to say in response to your questions, particularly with respect to any interpretations regarding the upcoming request for proposals.

Thank you.

[The Chair, NDP, Pat Martin]

Thank you, Mr. Sobrino.

I suppose, given the final comments you made regarding the sub judice rule and the fact that it is before the courts, it might be appropriate for me to read this brief legal opinion that we received from the parliamentary law clerk, which may set the context as to what would be permissible to respond to and what wouldn't.

We should note that the leave to appeal was filed on May 16, which was last Thursday, I believe. I don't know whether it's leave to appeal the penalty or to appeal an error in law, but that would make some difference as to what we comment on. If there is an error in law, that's broader and more encompassing; if it's the $40 million penalty, that narrows what we can discuss here.

Let me just read one paragraph by the parliamentary law clerk:

The sub judice convention extends to the subject matter of the lis, rather than to the entire topic at hand. In practical terms, this means that participants in [the government operations committee] should leave the judicial branch to render its decision on the actual legal dispute free from parliamentary interference, and should therefore refrain from engaging in discussion of the specific points in legal contention in this case. The application of the convention does not mean that the Committee is precluded from discussing the entire subject matter of relocations, especially policy questions. In fact, the Committee should not be impeded by the convention from discussing the general questions of policy involved in relocation, nor the general practices of the government of Canada in this area of public administration. The comity and restraint ensuring the ability of each branch of government to function without interference by the other runs in both directions.

If that is helpful to members as they frame their questions, it may give some guidance as well to our witnesses as to what they can and cannot answer.

But it raises the question of whether the notice to appeal or the leave to appeal is for the penalty or the actual details of the tendering and the practice and the oversight and fairness, etc., of the contract.

That said, the first questioner is Mathieu Ravignat.

[An hon. member]

No, no.

[The Chair, NDP, Pat Martin]

Well, my list says Mathieu Ravignat.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

That's a mistake.

[The Chair, NDP, Pat Martin]

It will be Linda Duncan apparently.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Thank you. We will wait with bated breath for Mathieu Ravignat.

Thank you very much to the witnesses. We'd like to have you for longer, but I guess you're not allowed to, so we'll try to be efficient in our questions. It's nice to see you all again.

I will try to skirt around the particular incident of Envoy because it is being litigated, but what I am interested in.... I'll ask a very specific question first and then I have more of a broad-based one.

The government contracts regulation, SOR/87-402, section 18, makes it mandatory that any contractor making a false declaration in information provided in the bid is deemed in an act of default. The government is then given the discretionary power to terminate a contract and recover any money given out.

Has Public Works ever terminated a contract under that rule, and in what situation would Public Works consider terminating a contract under that regulation?

[Pablo Sobrino]

We haven't gone through that experience. We do terminations for convenience, but we haven't terminated under that particular section of the regulations, to our knowledge.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

Maybe I'll move on to the broader question. A number of authorities have made recommendations on improving the fairness in the tendering process. The Auditor General's report, of course, in 2006 recommended that more than one person evaluate the financial side of tendering and that detailed briefings be provided for senior management in all major contracts. There was also a previous Federal Court ruling.

We had the public accounts committee making a number of very strong recommendations, including for Public Works, Treasury Board, and client departments—a certification process to check the veracity of RFPs, and whether Treasury Board has provided public accounts a full explanation for failure to disclose information to the Auditor General, and so forth.

Can you tell us what new measures have been taken, say since 2006, to address these series of recommendations by the Auditor General, by the courts, and by the public accounts committee to avoid situations of fraud, collusion, or bid rigging?

[Pablo Sobrino]

Absolutely.

The first thing is on the evaluation of the financial component of a bid. Our procedures have changed; we now require two or more to participate in that evaluation. We also do the governance regime on more complex procurements. This would be qualified as a complex procurement, and it now has a DG steering committee, so at the director general level, that works across client departments and is chaired by Public Works and Government Services.

We also now have an ADM committee as well that meets during the procurement process. This is a process that we use for all complex procurements and not just this particular one. These measures have been put in place since that observation as a permanent kind of policy application.

The other element that we've introduced, of course, is a procurement code of conduct for Public Works and Government Services employees. We also have the integrity measures that have been introduced, with changes as recently as last November, which affect those external companies that we do business with.

That's a full scope of the many measures we've put in place since, I believe, 2009 or 2010.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

I want to ask you about this fairness monitor office that has been set up. I can't talk about the court ruling, and presumably we will have you back when the government finishes spending taxpayers' money to drag this case out. The court found a completely different finding than the fairness monitor.

I know you can't speak to the particular case of Envoy, but I'm wondering if, as a result of some of the findings in that litigation and by the Auditor General, you are giving second thought to the way the fairness monitor office is set up. Are you giving consideration to establishing something like a full-time procurement ombudsman for these larger procurements?

[Pablo Sobrino]

I will just speak to the fairness monitor. The fairness monitor is an independent third party that our departmental oversight branch, which is an independent group within the Department of Public Works.... A colleague, an assistant deputy minister, administers the program.

The fairness monitors are hired under contract to do any procurement where we believe a fairness monitor would be useful. So any complex procurement generally has a fairness monitor. They're independent contractors. They're from external companies.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

I'm aware of what they are. I'm asking if you're giving consideration to changing the way the monitoring of these contracts is being done.

[Pablo Sobrino]

Right now we have improved the statement of work. We've had discussions with a fairness monitor community to improve their ability to pronounce on fairness issues within the process. We would be happy to share the statement of work we now use for fairness monitors.

[Linda Duncan, NDP, Edmonton Strathcona, AB]

I would appreciate it if you could provide that.

[Pablo Sobrino]

And I should also say that IT/NET was the fairness monitor for the 2009 procurement. That is the fairness monitor report that is actually posted on our website as well, if you search for—

[The Chair, NDP, Pat Martin]

Thank you, sir.

Next for the Conservatives, we have Mr. Ron Cannan.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you, Mr. Chair.

Thanks to our witnesses. I'm just following up on the line of questioning from Madam Duncan. Today we're focusing on the 2009 contract award and what measures our government has taken to ensure that the process for procurement is much more fair, open, transparent, and competitive. Ms. Duncan talked about the AG report. You talked about how you have more than one person evaluating the process.

Can you maybe expand a bit more about one of the other recommendations from the Auditor General. It talked about ensuring that Public Works has briefing material prepared for senior management that contains “sufficient detail to allow appropriate management oversight and review”. Could you explain the specific measures your department has taken to address this concern, and how you've done this?

[Normand Masse, Director General, Services and Specialized Acquisitions Management Sector, Acquisition Branch, Department of Public Works and Government Services]

Yes. What we established in those major procurements is setting up an extensive, internal, interdepartmental governance structure. Basically, all of those departments, including Public Works, and the clients, in this case, are being provided with regular updates on the project and regular briefings. The material is submitted and presented to those committees to ensure the monitoring and the proper governance. This is not only done for something like the IRP, but for all major procurement.

The fairness monitor—we talked about that.

The interdepartmental team as well is created in those major contracts. Again, it's to share the information and to develop a proper approach to procurement.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Thank you.

Moving forward now, going to the 2009 contract, can you explain or share with the committee how you've gone about certifying that the process...that accurate data is to be provided in the RFP? And was this implemented prior to the 2009 contract?

[Pablo Sobrino]

I'll quickly speak to that. The certification process was put in place that required the assistant deputy minister to sign off from the client departments on the information provided by those departments, on the volumes and usage of the program. We sought that because one of the issues that has come up in the past has been whether the data available was accurate or not. So that certification process is what we've put in place now.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Did the department, then, fully implement all of the AG's recommendations in the report, and prior to the initiation of this new tendering process for the IRP, as recommended by the PACP committee?

[Vincent Robitaille, Senior Director, Professional Services Procurement Directorate, Department of Public Works and Government Services]

Yes. All of the recommendations were applied for the 2009 procurement. And they will also be applied for the upcoming one.

[Ron Cannan, Conservative, Kelowna—Lake Country, BC]

Their current contract is scheduled to expire in November 2014. Many of us have been contacted by individuals who are concerned about going forward. Can you explain a little bit further? Ms. Duncan talked about engaging the fairness monitor. At what stage of the process is the fairness monitor engaged? At what stage is the third party engaged? And what are their roles?

[Pablo Sobrino]

We're beginning to launch the process, so we'll be engaging a fairness monitor in the very near future.

We'll be working with the client departments to put together their initial requirements, which will be based on the policies that they have to deliver on for their employees, so Treasury Board, RCMP, and the Canadian Forces.

Once we've put those requirements together, we'll be going out for a request for information to industry, and that will be the beginning of engagement with industry. At the beginning of engagement with industry, one of the fundamental questions we're going to ask is, how do we structure this procurement to get the right outcome? That engagement will involve a set of questions. There'll be an industry day, there'll be a set of questions, and we'll wait for responses.

Subsequent to that, we'll get some conclusions out of that, which may require a second engagement with industry—or not, depending on the results of the information we get. On that we will then put together the request for proposal, and it'll be used as a draft request for proposal that will go back out to industry.

The fairness monitor oversees every one of these discussions, and they also oversee the meetings we have in terms of each of the steps in the process, so the internal meetings as well as the meetings with our clients and the meetings with industry.

Once the draft request for proposal has gone out, we receive comments and we do the changes required to that, based on those comments, and then go to a final request for proposal.

One of the things we will be developing in the process is an evaluation framework, which is how we'll evaluate the request for proposals. We are going to be engaging with an independent third party to do the evaluation, to assess if the evaluation is fair and does not favour an incumbent, and that it's treated fairly and openly.

The last element after that, once there is the request for proposal, is that the bids come in and then we have to prepare a Treasury Board submission for contract approval.

As you can see, there is a fair amount of time. We need the time to put all that in place so that we have a positive outcome at the end.